The business of HIV

Battling the virus

A huge, strange drug market

THE coming weeks may bring a victory in the long war against the human immunodeficiency virus (HIV), which causes AIDS. A drug called Truvada already treats the disease. By June 15th American regulators are expected to approve its use to prevent the transmission of HIV, too.

The past 30 years have produced several triumphs. A flood of money has helped scientists to invent new drugs and health workers to deliver them to those in need (see chart 1). These drugs have transformed a fatal disease into a chronic one. They have also made HIV a big business.

Sales of antiretroviral drugs in America and the five biggest European markets reached $13.3 billion in 2011, according to Datamonitor, a research outfit (see chart 2). The market is as unusual as it is large, both buoyed by government support and worryingly dependent on it. The past decade has brought fancier medicine in rich countries and copious aid for poor ones. But the war is far from won.

Publicly funded research has played a larger role in developing drugs for HIV than for other diseases. A study published last year in Health Affairs found that HIV drugs were three times as likely to involve a patent from the public sector. HIV also has special status among regulators. America's Food and Drug Administration (FDA) created a faster way to review HIV drugs, allowing them on the market before the most expensive stage of clinical trials.

Convenient cocktails

In total, public and private investment has yielded more than two dozen HIV drugs. In 1987 Burroughs-Wellcome (now part of GlaxoSmithKline) introduced the first one, tackling an enzyme that helps the virus progress inside human cells. In 1995 Hoffmann-La Roche, a Swiss drug firm, launched the first protease inhibitor, which interrupts the virus at a later stage of replication. Today different medicines are combined to suppress resistance or reduce side-effects. The rise of combination therapy has brought a flurry of cross-licensing: companies strike deals to sell each other's drugs in carefully calibrated cocktails.

One company stands out: Gilead, of California. A late entrant to the HIV race, Gilead quickly took the lead. Its strategy was simple: the more convenient the treatment, the better. In 2004 Gilead launched Truvada, a once-a-day, one-pill combination of two drugs. In 2006 it introduced Atripla, a once-a-day, one-pill combination of Truvada and another treatment. Atripla's average wholesale price in America is nearly $25,000 per patient, per year. In 2011 its global sales reached $3.2 billion.

More good news for Gilead has come in recent weeks. An FDA panel recommended Truvada for preventive use: ie, to protect healthy people from contracting the virus. Another FDA panel endorsed Gilead's new Quad pill, which is the simplest, most effective combination drug to date.

If the process for developing HIV drugs has been unusual, selling them has been even more so. America is the rich world's biggest market, with 841,000 patients diagnosed—ten times as many as in Britain. More than 60% of HIV drugs in America are bought with public money. Insurers give HIV special treatment: patients are rarely pressed to buy the cheapest pills, as they might be if they had another disease.

Distributing drugs in poor countries is harder. A decade ago, hardly any poor people could afford them. At first, drugs firms handled this badly. In 1998, 39 big Western firms sued South Africa to protect their HIV patents. Global uproar ensued; the firms backed down in 2001.

Then two things changed. First, rich countries started donating vast sums to fight AIDS in poor ones. In 2000 there was less than $2 billion for HIV programmes each year; by 2010 there was $15 billion, thanks to the Global Fund to Fight AIDS, Tuberculosis and Malaria and George Bush junior's President's Emergency Plan for AIDS Relief (PEPFAR).

Second, the price of AIDS drugs plunged. In May 2000 a year's “triple cocktail” therapy cost $10,000 or so. By 2011 the same pills sold for $62 in poor countries. PEPFAR cash buys generic versions of patented drugs, which may be supplied only to poor countries. Last year two drugmakers won most of PEPFAR's contracts: Aurobindo, an Indian firm, and Matrix, an Indian firm acquired in 2007 by Mylan, an American one. PEPFAR's bidding system keeps margins slim even by the standards of the generics industry, says Rajiv Malik, the president of Mylan. But volumes are huge.

Can treatment expand further? Despite the subsidies and the plunge in prices, less than half of those infected with HIV take HIV drugs. Those who do, however, live a long time, and they have to keep taking the pills. What's more, new studies show that it helps to start treating patients early, so demand is sure to rise.

Alas, aid dipped in 2009 and 2010, thanks to the financial crisis. To make matters more complicated, there is a trade-off between more drugs and better ones. Most patients in poor countries get outdated pills, according to Médecins Sans Frontières. Allowing generics firms to copy yet more patented drugs might help. Since 2006 Gilead has licensed drugs to generics firms for 5% royalties. Last year it went further, agreeing to license drugs to a “patent pool” to centralise royalty deals for a range of firms. So far, however, Gilead is the only Western company to join.

Even in rich countries, public willingness to pay for the best drugs may be waning. Express Scripts manages drug costs for American employers. With Gilead's expensive Quad poised to enter the market, employers have started asking Steve Miller, the chief medical officer, to contain HIV costs, possibly by nudging patients towards cheaper drugs.

There are two distinct HIV markets. In rich countries, many good treatments jostle for market share. The best will generate fat profits, since patients have to take their pills every day. But Datamonitor predicts that growth will slow after 2017, as many drugs lose patent protection and prices crash. In poor countries, by contrast, Big Pharma makes very little money but the most efficient copycats thrive. Meanwhile, the world still waits for a cure.